Optus loses TV Now case against Telstra, AFL and NRL

This case is essentially the latest example on these shores in the ongoing love hate relationship manifested as legal conflict between the electronic equipment industry and the entertainment industry.

Today the Full Court of the Federal Court has overturned on appeal by Telstra, the Australian Football League and the National Rugby League ("the Appellants") a decision of a single member of the Federal Court which held that Optus was not infringing the copyright interests of the Appellants. Optus provides a service called TV Now to subscribers which, according to Optus' own website, "allows you to record and watch later free to air TV shows on either your mobile or your PC. It allows you the freedom to record TV shows anytime, anywhere to play back later at your convenience wherever and whenever you want."

The NRL and AFL had entered into a commercial relationship with Telstra, granting Telstra an exclusive licence to communicate to the public, by means of the internet and mobile telephony enabled devices, free to air television broadcasts of football matches conducted by the NRL and AFL. It was a concern to all three companies that Optus' TV Now service would undermine their commercial relationship and ultimately adversely impact the actual competitions themselves. The questions to be decided at first instance and appeal was deceptively simple, 'Who is making the recording? Is it (a) Optus, (b) Optus and the subscriber, or (c) the subscriber?' The answer to that benign looking question would have very different consequences. Below we explore why.

The Legislative Provisions

In Australia the intellectual property contained in cinematic films, sound recordings and television broadcasts is protected at law by the relevant provisions of the Copyright Act 1968. To assist in understanding the issues and how they are applied to the law, they are extracted here:

Nature of copyright in cinematograph films

86 For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a cinematograph film, is the exclusive right to do all or any of the following acts:

(a) to make a copy of the film;

(b) to cause the film, in so far as it consists of visual images, to be seen in public, or, in so far as it consists of sounds, to be heard in public;

(c) to communicate the film to the public.

Nature of copyright in television broadcasts and sound broadcasts

87 For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a television broadcast or sound broadcast, is the exclusive right:

(a) in the case of a television broadcast in so far as it consists of visual images — to make a cinematograph film of the broadcast, or a copy of such a film;

(b) in the case of a sound broadcast, or of a television broadcast in so far as it consists of sounds — to make a sound recording of the broadcast, or a copy of such a sound recording; and

(c) in the case of a television broadcast or of a sound broadcast — to re-broadcast it or communicate it to the public otherwise than by broadcasting it.

Infringement by doing acts comprised in copyright

101 (1) [Infringing act] Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

And finally the defence for domestic consumers who copy a broadcast at home for no other purpose than their own personal use:

Recording broadcasts for replaying at more convenient time

111 (1) This section applies if a person makes a cinematograph film or sound recording of broadcast solely for private and domestic use by watching or listening to the material broadcast at a time more convenient than the time when the broadcast is made.

Making the film or recording does not infringe copyright

(2) The making of the film or recording does not infringe copyright in the broadcast or in any work or other subject-matter included in the broadcast.

Dealing with embodiment of film or recording

(3) Subsection (2) is taken never to have applied if an article or thing embodying the film or recording is:

(a) sold; or

(b) let for hire; or

(c) by way of trade offered or exposed for sale or hire; or

(d) distributed for the purpose of trade or otherwise; or

(e) used for causing the film or recording to be seen or heard in public; or

(f) used for broadcasting the film or recording.

NOTE: If the article or thing embodying the film or recording is dealt with as described in subsection (3), then copyright may be infringed not only by the making of the article or thing but also by the dealing with the article or thing.

(4) To avoid doubt, paragraph (3)(d) does not apply to a loan of the article or thing by the lender to a member of the lender’s family or household for the member’s private and domestic use.

This case was largely determined as a result of the technological specifics (as opposed to some legal technicality) that were involved in respect of the TV Now service. It is technically rather convoluted, as the Full Court acknowledged when explaining how they arrived at a different conclusion to the judge at first instance. They heaped praise on the judge at first instance even though they delivered a contrary verdict. They said 'His Honour conducted the proceeding at first instance in an expeditious manner, and reasoned cogently in his reasons for judgment. The primary judge has distilled very complicated technology and has crystallised complex issues in a way that has made the management of the appeal much easier than it might have been.'

The TV Now Service allows subscribers to record free to air TV by four different means, namely,(1) a personal computer; (2) an iPhone or iPad; (3) Android mobile devices; and (4) most 3G mobile phones. The TV Now system detects the device the subscriber is using and transmits a stream of data in the form 'suitable for that device from one of the four recordings of the programme held in Optus’ data centre. If the subscriber later wishes to view some or all of the programme on another compatible device, the system will respond accordingly.'

The central issue of "Who makes the copy?" was determined by the primary judge to be the subscriber. The Full Court decided it was Optus, or Optus and the subscriber jointly (which was the Court's preferred view). It decided however that the s 111 domestic consumer defence was not available to Optus even if the subscriber was found to be a party to the making of the copy.

The judge at first instance accepted Optus' arguments that the "service that TV Now offers the user is substantively no different from a VCR or DVR" That it is the subscriber who selects the programme to be copied and initiates the process of copying. And as the Full Court summarised, "that the subscriber’s is the last 'volitional act' in the sequence of acts leading to a copy being made and, for that reason, is significant in determining the identity of the maker – the more so as a s 101 infringement requires a 'person' to do or authorise the doing of, any 'act' comprised in the copyright." The Full Court's rejection of that view was as follows:

58 We consider that there are several reasons for rejecting the proposition that the subscriber was the maker for s 101, hence s 111, purposes. First, the meaning given "make" is, in our view, a contrived one. When s 86(a) refers to making a "copy" of a film, when s 87(a) refers to making a cinematograph film of a television broadcast or a copy of the film, when s 87(b) refers to making a sound recording or a copy of such, they each are referring to so acting as to embody images and sound in an "article or thing" (see the s 10 definitions of "cinematograph film" and "copy") or a "record". In our view "make", as it appears in s 86(a) and s 87(a) and (b), is a fundamental concept underpinning the Act and the essence of it is the idea of making (ie creating or producing) a physical thing (ie the embodiment of the copyright subject matter). We agree with the AFL’s submission to this effect. The OED definition with its emphasis on producing a "material thing" is an apt one for the purposes of s 86(a) and s 87(a) and (b) – and hence for s 101(1) and s 111 of the Act. In saying this we do not discountenance the need for there to be a causative agency if a copy of a particular thing is to be made. The issue is not simply how something is made. It is by whom is it made. This, as will be seen, is of some importance when we come to consider whether copies were made by Optus and the subscriber jointly.59 The second reason for rejecting the proposition that the subscriber alone is the maker relates to how the system itself works. This is better discussed when considering whether Optus itself is the maker. We merely note here that a subscriber’s clicking on a button labelled "record" may trigger a sequence of actions which result in copies of a selected programme being made, but it does not necessarily follow that the subscriber alone makes that copy.60 Thirdly, analogies are not necessarily helpful in this setting because they both divert attention from what the TV Now system has been designed to do and pre-suppose what is the function (albeit automated) it performs in the ongoing Optus-subscriber relationship. To anticipate matters, we consider that the system itself has been designed in a way that makes Optus the "main performer of the act of [copying]" (to adopt the language used in a recent Japanese decision involving a service relevantly similar to the present, which has been supplied to the Court in translation): see Rokuraku II, First Petty Bench of the Supreme Court, Japan, 20 January 2011.

The Full Court found that Optus does not simply make available its system to another who uses it to copy a broadcast, but more accurately captures, copies, stores and then makes available for commercial purposes, a programme for later viewing by another.

The Full Court accepted that no copies were able to be made of a programme unless a subscriber selects a programme to be recorded and communicates that choice to Optus. A good deal of emphasis was placed on the subscriber's causative, or 'but for' action. The Full Court went on to point out however that once that choice of programme has been made the whole recording process, which is fully automated then commences.

The server enters or creates a schedule ID in respect of the programme selected and the use's unique identifying number in the user database; the recording controllers poll that database once a minute enquiring whether any users have scheduled the recording of any programme due to be broadcast at the time of polling; when the poll so identifies that the user’s selection is due to be broadcast, the MACF server informs the recording controllers which then cause four recordings to be made on the NAS hard disk – ie the timing of the recording coincides with Optus' recording controller causing the recording to be made, rather than when the subscriber communicates its selection to Optus.

The final issue that the Full Court had to deal with was whether or not Optus could rely on the s 111 defence. After discussing the history of s 111 and the intention of some recent amendments to make it 'technologically neutral,' the Full Court gave this argument short shrift as this key passage of their reasoning makes clear:

89 There is nothing in the language, or the provenance, of s 111 to suggest that it was intended to cover commercial copying on behalf of individuals. Moreover, the natural meaning of the section is that the person who makes the copy is the person whose purpose is to use it as prescribed by s 111(1). Optus may well be said to have copied programmes so that others can use the recorded programme for the purpose envisaged by s 111. Optus, though, makes no use itself of the copies as it frankly concedes. It merely stores them for 30 days. And its purpose in providing its service – and, hence in making copies of programmes for subscribers – is to derive such market advantage in the digital TV industry as its commercial exploitation can provide. Optus cannot invoke the s 111 exception.90 This conclusion on the proper construction of s 111, when coupled with our conclusions on who is, or are, the maker(s) of the copies of a football match, is sufficient to dispose of this appeal.

The decision must provide some relief for Telstra who in April 2011 paid $153,000,000 for the exclusive right to broadcast football games over the internet and the G3 and 4 networks. If the decision at first instance had been upheld it would certainly have had major ramifications not just for Telstra but for the football codes. It may be seen as a bit of a disappointment for the electronic equipment industry and will certainly require them to be very careful when assessing the legality of the services they offer consumers. However, it should be noted that the Full Court did conclude that if the facts were different then a different conclusion could easily have been reached. They held:

100 We should emphasise that our concerns here have been limited to the particular service provider-subscriber relationship of Optus and its subscribers to the TV Now Service and to the nature and operation of the particular technology used to provide the service in question. We accept that different relationships and differing technologies may well yield different conclusions to the "who makes the copy" question.

It remains to be seen whether Optus will appeal to the decision to the High Court, because they might take some encouragement from the Full Court's observation, that it "found the questions raised in the appeals to be of some difficulty and considerable uncertainty."

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